B of I workers to vote on changes to pension scheme

BANK OF Ireland workers will be balloted on a series of changes to the company’s defined benefit pensions scheme – including a two-year freeze on any salary increases qualifying for pensionable salary – as the bank aims to tackle a €1.6 billion pensions deficit.

Staff members were told about the deal yesterday, which follows 10 weeks of negotiations between the Irish Bank Officials’ Association (IBOA), independent mediator Mark Connaughton SC, and the bank, which was represented at the talks by Brian Forrester, the former head of Bank of Ireland Life.

It is expected that members of the defined benefit scheme – which has been closed to new entrants since 2007 – will vote on the deal by April 29th.

Among the main changes outlined yesterday were: a temporary freeze on any salary increases qualifying as pensionable salary from April 2010 to April 2012; from April 2012 pension increases will be linked to the consumer price index (CPI) rather than salary, to a maximum of 4 per cent; and no pension increases for future retirees for three years from their date of retirement, after which pension increases will be linked to the CPI, to a maximum of 4 per cent.

Bank of Ireland said yesterday the changes would result in the elimination of 50 per cent of the €1.6 billion deficit, with the Bank contributing a further €750 million over the next five years.

IBOA general secretary Larry Broderick yesterday welcomed the deal, which he said avoided an extension of the retirement age, or an increase in staff contribution.

He said the deal offers an “equitable solution to a very difficult problem in which all of the stakeholders share the burden of addressing the deficit in the fund”.

Bank of Ireland said in January it would carry out a “comprehensive review” of its employee pension arrangements, in a bid to address its pension deficit.

The issue of pension shortfalls has been thrown into the spotlight recently by the proposed Basel III rules, which will force banks to set aside greater levels of cash to cover deficits in defined benefit pensions.

Last month AIB workers agreed to take cuts of up to 20 per cent in their pensions in an effort to cut the scheme’s deficit.

AIB reduced the bank’s pension deficit to €714 million at the end of 2009 from €1.3 billion at the end of June 2009, and from €1.1 billion a year earlier, after changes in final salary benefits moved to average pay over the final five years from the final salary previously.